RAA Sales Comparison Approach 3 — Questions and Answers
Question 1: Which situation would most likely require a location adjustment when using the sales comparison approach?
- A comparable sold two months before the appraisal date
- A comparable is located on a busy arterial road while the subject is on a quiet cul-de-sac (Correct answer)
- A comparable has one more bathroom than the subject
- A comparable was listed on the MLS for 90 days
Correct answer: A comparable is located on a busy arterial road while the subject is on a quiet cul-de-sac
Location differences such as traffic exposure versus a quiet street directly affect market value and require an adjustment.
Question 2: When selecting comparables for a residential appraisal, an appraiser should prioritize sales that:
- Have the highest sale prices to support the highest value conclusion
- Are most similar to the subject in terms of physical characteristics, location, and market appeal (Correct answer)
- Were listed by the same brokerage as the subject property
- Closed escrow within the past 90 days regardless of similarity
Correct answer: Are most similar to the subject in terms of physical characteristics, location, and market appeal
The best comparables are those that most closely replicate what the subject property would sell for, based on physical and locational similarity.
Question 3: In a market experiencing rapid price increases, an appraiser should:
- Ignore time adjustments to avoid over-inflating value
- Apply a positive time adjustment to bring older comparable sales to the current market level (Correct answer)
- Use only sales from the past 30 days even if they require large physical adjustments
- Average all comparables without time adjustments for objectivity
Correct answer: Apply a positive time adjustment to bring older comparable sales to the current market level
In an appreciating market, older sales are adjusted upward to reflect the value increase that occurred between the sale date and the effective appraisal date.
Question 4: What does a high gross adjustment percentage on a comparable sale typically indicate?
- The comparable is highly reliable and should be weighted heavily
- The comparable is very similar to the subject property
- The comparable has significant differences from the subject, reducing its reliability (Correct answer)
- The comparable sold in a strong seller's market
Correct answer: The comparable has significant differences from the subject, reducing its reliability
High gross adjustments suggest the comparable differs substantially from the subject, making it less reliable as an indicator of subject value.
Question 5: A residential appraiser is appraising a 3-bedroom, 2-bath home. Which comparable would generally be preferred?
- A 5-bedroom, 3-bath home that sold recently in the same neighborhood
- A 3-bedroom, 2-bath home that sold 18 months ago in the subject's neighborhood
- A 3-bedroom, 2-bath home that sold 3 months ago in a similar competing neighborhood (Correct answer)
- A 4-bedroom, 2-bath home that sold last week on the same street
Correct answer: A 3-bedroom, 2-bath home that sold 3 months ago in a similar competing neighborhood
A sale with identical bedroom/bath count and a recent sale date from a competing neighborhood typically offers a better indicator than an older identical sale or a recent sale with physical differences.
Question 6: The term 'bracketing' in the sales comparison approach means:
- Placing the subject's value estimate between the highest and lowest comparable sale prices
- Selecting comparables that are both superior and inferior to the subject in key elements (Correct answer)
- Averaging the top and bottom comparable prices to find the midpoint
- Limiting comparable selection to sales within one mile of the subject
Correct answer: Selecting comparables that are both superior and inferior to the subject in key elements
Bracketing involves choosing comparables that surround the subject—some better and some worse—to logically bracket where the subject's value should fall.
Question 7: Which of the following is NOT typically considered a transactional adjustment in the sales comparison approach?
- Financing concessions
- Conditions of sale
- Living area (square footage) (Correct answer)
- Market conditions (time)
Correct answer: Living area (square footage)
Living area is a physical characteristic adjustment, not a transactional adjustment; transactional adjustments relate to the terms and circumstances of the sale itself.
RAA Sales Comparison Approach 3
Which situation would most likely require a location adjustment when using the sales comparison approach?